Taiwan, HK draw unloved Singapore-listed Chinese firms

SINGAPORE Thu Feb 17, 2011 4:44am EST

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SINGAPORE (Reuters) - Singapore is slowly losing its luster as a capital-raising venue for Chinese companies.

Over a dozen Chinese firms trading on the Singapore Exchange (SGXL.SI) are expected to seek dual listings in Taiwan, Hong Kong and Seoul in 2011, exceeding last year's total, drawn by higher valuations and aggressive marketing efforts by rival bourses.

"We should see around 13-15 companies this year because markets are getting hotter and Singapore investors are still not showing lots of signs that good companies are being appreciated," said Roger Tan, head of research at SIAS Research.

"After a year of seeing successes and failures, companies are now more knowledgeable about dual listings. The good ones will definitely have more confidence to list and the not so good ones will put in more effort to get there," Tan added.

Last year, around 10 Singapore-listed Chinese companies, known in the city-state's market as S-chips, ventured into Taiwan and Hong Kong. South Korea is also increasingly becoming a dual listing destination.

Yangzijiang Shipbuilding (YAZG.SI), one of China's largest shipyards, raised some T$4.8 billion ($151 million) from issuing Taiwan Depository Receipts (TDRs) in September last year as trade links between China and Taiwan expanded.

Depository receipts allow investors to buy shares of foreign companies in their own markets.

Analysts said the trend could become worrying for the Singapore Exchange, which has launched a $7.9 billion bid for ASX (ASX.AX), if these companies also begin to delist from the bourse. So far, however, companies are only seeking dual listings and very few have delisted.

SINGAPORE DISCOUNT

Chinese companies, mainly small ones, pursue primary listings in Singapore because they are being edged out by larger mainland firms in the Hong Kong and Shanghai IPO markets.

Some 157 Chinese companies were listed in Singapore as of end-January this year. Those that were primary-listed had a total market capitalization of around S$49.5 billion ($38.7 billion), while secondary-listed ones were valued at S$4.5 billion.

By comparison, the 30 firms which are the constituents of the main Straits Times Index .FTSTI are valued at nearly S$500 billion.

The FTSE Straits Times China Index .FTFSTC trades at about 9 times current earnings, compared to about 14 times for the main index. The Hang Seng China Enterprises Index .HSCE, an index of top Hong Kong-listed mainland firms, trades at around 16 times.

Singapore investors' confidence in S-chips took a hit when steelmaker FerroChina defaulted on loans just weeks after it announced strong quarterly earnings in 2008. It was followed by news of accounting irregularities at several other S-chip firms.

"People who got burned by some S-chips will not be able to forget easily, which affects the reputation of these companies," said Kristy Fong, an investment manager at Aberdeen Asset Management Asia.

"Many S-chips may be seeking dual listings because higher trading volume is a way for them to get liquidity. Valuation would be another reason, and they may also want to increase their profile," she added.

Canned food firm Sino Grandness (SOGF.SI), foam material maker Ziwo Holdings (ZIWO.SI) and alcohol producer Dukang Distillers (DDHL.SI) have announced their plans to issue TDRs.

This year, Taiwan's stock exchange expects the number of overseas companies issuing TDRs to increase to 20 from 12 in 2010. However, it did not disclose how many of them will be Singapore-listed firms.

"The Taiwan stock exchange is very aggressive in trying to attract companies from abroad, and China companies are obviously some of those that they will target," said Lo Kim Seng, director of law firm Duane Morris & Selvam.

Lo, who has handled the TDR issues of several S-chips, added that Taiwanese authorities have been easing regulations to issue TDRs and making the process relatively fast as it takes only about a month and a half from the first filing to the actual listing.

GRASS GREENER ELSEWHERE?

Venturing offshore may nudge Singapore investors to give a second chance to the S-chips, and many firms see a rise in their share prices here from the time they announce their dual listing plans to their eventual listing.

DMG & Partners Research analyst Tan Han Meng said the average share price increase for S-chips that also listed in Hong Kong was around 19 percent, while the figure for Taiwan was 9 percent, excluding outliers.

However, the average share price performance post dual listing was less rosy.

"Markets are generally efficient and would eventually reward companies with similar valuations based on their individual fundamentals," Tan said. ($1 = 1.279 Singapore Dollars)

(Additional reporting by Faith Hung in TAIPE; Editing by Muralikumar Anantharaman)

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